May 27th, 2022 | 11:35 CEST
Nordex, Saturn Oil + Gas, JinkoSolar - Energy shares with potential
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Nordex - Profit warning
The general conditions for Nordex are actually ideal. The Ukraine conflict made the dependence on Russia's energy supplies clear. The German government reacted immediately and wants to accelerate the expansion of wind power. That applies above all in Germany. Looking more closely, rising interest rates in the US are causing fears of high financing costs. In addition, material costs are rising, and supply chains are severely disrupted due to China's Zero-COVID policy. There is currently no relief in sight in China's ports.
From this perspective, Nordex's profit warning on May 24 did not come out of the blue. Margins were already the problem at the wind power providers before. Management still expects sales of EUR 5.2 to 5.7 billion, with an EBITDA margin of between -4 and 0%. Due to the war in Ukraine, sales of EUR 200 million will be lost. In addition, further write-downs are expected due to stopped projects. Even worse is the assessment that supply chain problems will continue to burden the Group in 2023. However, in the medium term, the Company sees good opportunities as climate change is to be combated worldwide.
The Jeffries analyst agrees, who expects prices to fall in the short term but is also convinced that part of the profit warning was already priced in. A price target of EUR 16 was issued, and the share was left at Buy. Goldman Sachs put the stock on Hold, but with a price target of EUR 18.30. Since the announcement, the share has lost considerable ground and is currently trading at EUR 10.41. The support area at EUR 10.85 has been broken, and a test of the EUR 9.55 mark is likely.
Saturn Oil & Gas - Forecast increase for 2022
The phase-out of fossil fuels is a done deal in the Western industrialized nations, but the road ahead is long. The world's population is growing steadily, and thus the demand for energy is increasing. In addition, a large part of oil production is consumed in the chemical, cosmetics and pharmaceutical industries. Since the Ukraine crisis, the oil price has been able to stay permanently above USD 100, helping oil producers such as Canada's Saturn Oil & Gas. The Company increased its production by over 3000% in one year due to acquisitions. In the first quarter, production was around 7,500 boe/d.
But that number will increase significantly by the end of the year. At the International Investment Forum, CEO John Jeffrey stated that they plan on 9,000 barrels per day by the end of the year. Each extra barrel helps take better advantage of the high oil price. A lot of capital was needed to make the Oxbow acquisition. Therefore, the financiers wanted a guarantee of repayment, so parts of the production were hedged to make the deal happen. CFO Scott Sanborn explained in an interview at Invest that EBITDA before hedging will be about 170 million Canadian dollars (CAD) and about CAD 90 million after hedging. The Company says it can keep the production rate stable for around 20 years.
From an ESG perspective, Canada is way ahead with its environmental regulations. If you want "clean oil", you should get your supplies from Canada. However, all this has not yet given the share much impetus. Compared to its peer group, the Company is clearly undervalued, even according to the analysis of various research houses. For this reason, the Company was recently at Invest in Stuttgart and is sponsoring the Challenger tennis tournament in Cologne-Troisdorf, which former Davis Cup winner Marc-Kevin Goellner is co-hosting. This educational work is paying off, and the share has gained around 23% to CAD 3.00 in the last few days. The market cap of CAD 97 million is thus now above the planned EBITDA of CAD 90 million, but it is still very cheap.
JinkoSolar - Covid restrictions weigh down
Greentech stocks are in. The same signs apply as for Nordex, with one big difference. In case of doubt, solar energy can also be installed on your own balcony, and it does not require high financing costs as long as you do not want to equip your entire roof with solar panels. There is also no need for lengthy approval processes. Thus solar energy has an advantage over wind power. This can also be seen if you superimpose the charts of Nordex and JinkoSolar. It is worth bearing in mind that JinkoSolar produces in China and is therefore not as strongly affected by supply chain problems.
However, the figures for the first quarter clearly missed analysts' expectations, especially in terms of profit. Revenue increased significantly YOY to USD 2.32 billion, a good USD 270 million above analyst estimates. Compared with Q4, however, sales were down. However, earnings per share were only USD 0.10, compared to expectations of USD 0.49. The forecast for the full year is for total sales between 35 and 40 gigawatts. The main problem for the Group is the strong covid measures in its own country. However, these problems are expected to be short-term in nature.
Tailwind for the stock came from the EU, which wants to simplify and accelerate the approval processes for solar plants significantly. After the last upward breakout, the share consolidated to USD 42.82 on May 12. The stock then rebounded dynamically to the upside, gaining 37% at its peak, and is now back above the important 200-day average. Currently, the price per share is USD 58.30. If the breakout above the USD 60 mark succeeds, a test of USD 66.37 is likely.
The hunger for energy remains high, regardless of whether renewable energies or oil. Nordex must now find a bottom after the profit warning. If the supply chain problems in China are solved, things should start to look up again. Saturn Oil & Gas is currently significantly undervalued and offers the most potential of the three stocks. JinkoSolar has an easier time selling its products due to less bureaucracy and is not as affected by supply bottlenecks. However, one should wait for a setback before entering the market.
Conflict of interest
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